MLR is another hidden gem within ACA.   It stands for Medical Loss Ratio.

It was added by  Senator Al Franken of Minnesota.  Its purpose is to set boundaries on the amount of money an insurance company can keep for administrative costs including profits.

It means that if the people that the insurance company insures don’t use very many services, the insurance company may have to refund some money to the people that paid premiums because they aren’t allowed to make too much profit.

This made sense because the ACA also made people buy health insurance or pay a penalty. Without some regulation like the MLR, the insurance companies could increase their rates and increase their profits.

Another rule meant that companies that offered policies on the Health Exchange could not charge a different amount for the same product if sold anywhere else and could not deny coverage to anyone that applied.

Other rules removed the ability of insurance companies to charge people more based on gender or medical conditions.

Before the ACA some companies would price their products so that anyone other than young healthy people would shop somewhere else. Since healthy people used less services and companies didn’t have to make sure wellness services were covered without first having to meet the deductible, some companies made lots of profits for these policies.

The policies did not provide very good coverage but they were good for business.

Part of the reason that insurance companies are pulling off the Exchanges is because they can’t make the kind of profits.

Repeal / Replace removes all those corporate regulations.

And people who need coverage get hurt.  And insurance companies go back to being in control and able to set policies to maximize profits not providing health benefits.

Insurance is intended to share risk.  The best model is one that has everyone in one large risk pool.  This is what Medicare does – and why it is the most efficient health insurance plan in place today.  This is what single-payer would do.

Competition and for-profit models actually don’t work well in insurance models.  The only thing insurance companies can compete with is negotiating lower costs to deliver benefits [possible only when an insurance company has enough members to be able to negotiate discounts] or reducing their profit margins.  Since all insurance involves some amount of risk, companies cannot survive if their risk margin is too small.

High-risk corridors were put in place for the ACA to help prevent insurance companies from facing losses if they happened to have a lot of people who all needed more care than those covered by other policies.  The ACA had a model to share risk across private companies – and to set up high-risk corridors where some portion of premiums would be shifted across companies if some companies had more risk that others.

But Congress went back on the promise to fund high-risk corridors.  And this made insurance companies lose money -because they already took on the risk.  And this made them pull out of the Health Exchanges.  Sort of a self-inflicted death-spiral

All of this stuff is complicated.

Removing regulations in the ACA will return us to a time when for-profit insurance companies had the power.

How is this better for most of us?

Ask your representatives why they think this is a good deal.  Start with asking if they even understand it.   Because they aren’t passing laws like they understand the consequences.

 

 

 

 

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